A price break at the pump

As everyone in America knows, it’s getting downright painful to pull up to the gas pump these days. Gas prices that are edging toward $4 a gallon are taking a bigger and bigger bite out of our pocketbooks this spring, and we haven’t even entered the busy summer driving season.

But here’s a bit of good news: gas prices today would be higher, maybe a whole lot higher, if ethanol was taken out of America’s fuel mix, a new study shows. And we Midwesterners are getting the biggest price break at the pump thanks to ethanol.

The study, conducted by researchers at Iowa State University and the University of Wisconsin, found that ethanol use reduced wholesale gasoline prices in 2010 by 89 cents a gallon nationwide because it reduced the need for costly imports of foreign petroleum. Those lower wholesale prices translated directly into lower prices at the pump, meaning that ethanol saved the average American family about $800 last year.

For Iowans and other Midwesterners, who are lucky enough to live near the source of most ethanol production, the news is even better. The use of ethanol in gasoline blends reduced the wholesale gas price by $1.37 a gallon, the study showed. In contrast, consumers on the East Coast, far away from the corn fields and biofuel plants, saw only a 58 cent decrease in the wholesale gas price because of ethanol.

Ethanol has been pumping out savings for consumers for more than a decade, the study notes. But the savings really start to kick in when petroleum prices head for the stratosphere, like they have this spring. And if ethanol wasn’t around, the researchers say that Americans could be forking over $6 a gallon or more at the pump—talk about highway robbery!

The savings from ethanol go way beyond the gas pump. Because transportation is such an integral part of the cost of everything we buy, consumers are reaping savings on all kinds of purchases, from food, to clothing, to those flowers you are going to remember to buy for Mother’s Day. And by helping Americans spend less at the pump, it means that consumers have more to spend on other things, like eating out or going to a movie or fixing up their homes, all of which create jobs.

Recently, federal environmental officials approved bumping the ethanol blend level up to 15 percent for most cars, up from 10 percent. It’s going to take a while for gas retailers to adjust to the new rules to add more ethanol. But when they do, consumers will be even bigger winners.

Written by Dirck SteimelDirck is the news services manager for Iowa Farm Bureau.